US Court Throws Out Lawsuit Against Ginn Developers

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A US court has thrown out a lawsuit filed against the developers of the $4.9 billion Ginn sur mer project, in which purchasers who spent between $525,900 and $1.37 million on acquiring real estate parcels had alleged fraudulent conspiracy, on the grounds that the Bahamas was the correct jurisdiction in which a court should hear their complaints.

District Judge Marcia Morales Howard, sitting in the Middle Florida courts, in her March 31, 2010, ruling dismissed in its entirety the lawsuit brought by a group of Ginn sur mer purchasers against the project and its developers for "improper venue".

"In so concluding, the court expresses no view as to the merits of the plaintiffs' claims, but simply holds that the [purchasers] 'must honour their bargains' and attempt to vindicate their claims in a Bahamian court," Judge Howard ruled.

Noting that the case "stems from their respective contracts to purchase undeveloped parcels of real property in the Versailles sur mer subdivision on Grand Bahama Island from Ginn-LA West End, a Bahamian corporation", the judge noted Ginn's argument that all contracts with the purchasers "contain enforceable forum-selection clauses designating the exclusive venue for the instant litigation to be in the Bahamas".

The Ginn sur mer lots in question had been purchased in 2006 and 2007, and the judge said: "Paragraph 22 of each sales contract contains an identical forum-selection clause purporting to designate the Bahamas as the exclusive venue for any legal action" relating to the agreements.

The US court found that the "contracts and underlying transactions" were international in nature, with the buyers all Americans. Ginn was a Bahamian company, "the contracts were negotiated in the US, but the closings apparently took place partially in the US and partially in the Bahamas".

"Finally, and perhaps most importantly, the subject matter of the contracts each concerns the sale of real property in the Bahamas," Judge Howard said.

The purchasers, though, had argued that the choice of the Bahamas as the jurisdiction governing the contracts was "unreasonable", claiming the deals had been produced through fraud, and that using this nation would prevent the hearing of claims under US law.

Judge Howard found that the contracts with Ginn were "freely negotiated", adding: "Although the forum selection, and indeed the entire contracts, are nearly identical, there is no indication from plaintiffs that they were not the product of free negotiation.

"In contrast to the terms of a cruise ticket forced upon a consumer with limited bargaining power, the instant contracts concerned sophisticated real estate transactions involving large sums of money - purchase prices ranged from $525,900 to $1.37 million. Indeed, the [$1.37 million] contract contains alterations - seemingly favourable to the buyer - that eliminate one provision of the contract and add others."

Judge Howard found that the choice of Bahamas as governing jurisdiction for the contracts was clearly stated in the documentation, even though the purchasers claimed that a hearing in this nation would 'prejudice' their case and deprive them of a fair hearing.

Rejecting this, the judge said the purchasers had "in a somewhat condescending manner", argued that Bahamian courts "are ill-equipped to adjudicate claims" that were complex.

She added: "The court finds that plaintiffs have failed to carry their heavy burden of showing that a Bahamian forum would deprive them of a full and fair hearing so as to make the forum-selection clause unreasonable."

Justice Howard also found: "Additionally, plaintiffs take issue with the fact that the contracts require litigation in the Bahamas despite having been carefully structured to avoid the necessity of plaintiffs having to travel to the Bahamas to complete the closing of the transactions at issue.

"Although these factors may make plaintiffs' suit prospects more difficult, and less appealing, the court cannot conclude that requiring suit in the Bahamas for a contract concerning the purchase by plaintiffs of property in the Bahamas evinces a bad-faith motive of discouraging plaintiffs from pursuing claims."

In its ultimately successful defence to the action, Ginn had alleged that it was merely "an attempt to find a scapegoat for their buyers' remorse", amid claims that a lender took a $276 million mortgage on the Grand Bahama site despite just the development receiving just 2 per cent of its loan proceeds.

Ginn, in a February 16, 2010, filing argued that while the plaintiffs had all purchased lots at the Ginn sur mer site in Grand Bahama, they were now seeking to blame it for all the problems stemming from the credit crunch and global recession.

"Following the unprecedented decline in the real estate market and the resulting mortgage crisis, plaintiffs now seek to hold Ginn responsible for the decline in their property values by alleging several claims under the [US] Interstate Land Sales Full Disclosure Act," Ginn alleged.

Much of the plaintiffs' arguments surrounded the $675 million syndicated loan that Ginn obtained from Credit Suisse, which was secured on Ginn Sur mer and four other properties it was developing. Ginn ultimately defaulted on the repayments due on this loan, leading the Credit Suisse syndicate to ultimately foreclose on it, including the Grand Bahama real estate it was secured upon, making them the developer's joint venture partner moving forward.

Ginn alleged that their case was " red herring", and said the real estate buyers bringing the action - all of them US citizens - knew the Credit Suisse credit facility was due "to be repaid through lot sales, which ceased as a result of the real estate market collapse.

"The Ginn defendants cannot possibly be at fault for the real estate market collapse."

Source: The Tribune